Transcript - ABC Drive (BHP)




SUBJECT: BHP’s tax avoidance.

STEVE AUSTIN: Queensland Labor MP, Wayne Swan, has taken aim at the global Australian mining conglomerate, BHP, over a confidential arrangement reached in the Queensland Supreme Court last week.

The Member for Lilley said that BHP sought to suppress further evidence of tax evasion on royalties payable to the Queensland Government. This comes after it was revealed that BHP received an updated $320 million assessment from the Queensland Government for royalties not paid.

The royalties dispute has now been settled in the Queensland Supreme Court; however, there’s a confidential legal agreement as to the nature of that settlement.

Federal Labor Member and former Federal Treasurer Wayne Swan, good afternoon to you.

WAYNE SWAN, MEMBER FOR LILLEY: Good afternoon Steve.

AUSTIN: What was the amount of the settlement between BHP and Queensland’s Treasury? What was the final amount, do you know?

SWAN: Well we don’t know exactly. What we do know was the early estimate was in the order of $300 million. What we also know is that the Treasury estimates were contained in Treasury papers some time ago. And we also know that the Queensland Government has said that there will be no material impact on their budget.

So I think what that means is they have certainly settled for hundreds of millions of dollars in this case. And that’s very significant because this is a transfer pricing case.

At the moment, BHP has an assessment from the Australian Tax Office to the tune of $1.1 billion for transfer pricing as well.

Transfer pricing relates to the use by BHP of a marketing hub in Singapore, where it simply shifts its profits, pretends value to those products is added in Singapore as it goes to China, even though the coal and iron ore is simply shipped straight from Queensland – or from Western Australia – to China. So this is an illegal activity.

Transfer pricing is used around the world by many multinational companies to evade their responsibilities in taxation.

So why I think this is significant is because, by agreeing to pay the Queensland Government at least hundreds of millions of dollars, they have conceded that their transfer pricing activity is illegal – that is, it is tax evasion.

AUSTIN: My guest is Federal Labor Member for Lilley, an electorate here in Queensland, Wayne Swan. He’s a former Federal Treasurer of Australia.

Now this was a confidential agreement. Why was it confidential? Why did the Queensland Supreme Court say this has to be confidential?

SWAN: Well I can’t tell you that, Steve. You’ll have to talk to either the Queensland Government or to BHP. But BHP refuses always to talk about these matters. It refuses to talk about its actions with the Commonwealth Taxation Office.

I’ve been raising these matters in the Parliament now for almost three years. And they are significant matters. They not only involve BHP; they involve Rio, they involve companies such as Chevron.

Back as far as 2012, I passed legislation through the Parliament to clarify what we meant by profit shifting. And of course, those laws have now resulted in some very significant decisions against other companies, notably Chevron.

And I believe that this decision in Queensland, where effectively BHP has conceded that it is involved in profit shifting, will have significant implications for the case that they are currently discussing with the Australian Tax Office as well. In all, when it comes to BHP, there is about $1.8 billion on the line.

AUSTIN: The royalties dispute that’s been settled in the Supreme Court confidentially last week; you see this as an admission that their transfer pricing activities are essentially illegal – why?

SWAN: Well, because they’ve paid a lot of money to the Queensland Government, and that was the basis of the case. They have been using their Singapore marketing hub to shift their profits to that marketing hub to avoid Australian taxation.

The core of profit-shifting is simply multinational companies shifting their profits to low-tax jurisdictions; in this case, Singapore. So they sell into Singapore, add a very significant mark-up – tax rates in Singapore are low – they then export it to China, somehow pretending this enormous value has been created in Singapore, when in fact the actual value of the product is created in Australia.

AUSTIN: Andrew, who’s a listener in Kangaroo Point, says “how does transfer pricing affect royalties, when royalties are charged by the tonne at the port?” He says transfer pricing should have nothing to do with it.

SWAN: It certainly does have a lot to do with it, and there are other aspects of this case as well, which I’m not privy to. I’ve seen some speculation about volumes being an issue as well. But as I’m not privy to all of the detail of the case, Andrew may have a point that volumes are involved as well.

AUSTIN: Part of your frustration, as you say, is that this agreement reached last week, shouldn’t be confidential.

SWAN: No, it shouldn’t. But there will be legal reasons for that and I can’t answer those questions. What I can tell you is that I’ve spent a lot of time analysing these issues. Not just from the point of view of BHP.

BHP is rather sad for the country; it’s supposed to be the Big Australian, but when it comes to these issues, it marks it as the Dishonest Australian. And I think a lot of people would be surprised that BHP is involved in this sort of activity, because you would expect better. For a country that has given so much to the corporate life of that company, that they would engage in this sort of activity.

AUSTIN: Yesterday in Federal Parliament, you described them as corporate tax dodgers. “One of the biggest,” I think you said.

SWAN: That’s right. If you look at the evidence that has been given by the ATO Commissioner, Mr Jordan, on numerous occasions, at various stages he has said there’s something like disputes covering companies of $4 to $5 billion in a year. Well, BHP’s in for $1.8 [billion], so that would make it one of the biggest tax termites here – if not the biggest. I’m also told that Rio is quite significant as well.

AUSTIN: My guest is former Federal Treasurer, Wayne Swan. He’s the Labor Member for the Electorate of Lilley, here in Brisbane. My name’s Steve Austin.

Now you’ve called on the company, in your speech in Parliament yesterday, to hold someone accountable – who?

SWAN: Well certainly, the company ought to go back and have a look at who was responsible for these relationships and who approved them. Ultimately, the Board is responsible. And we’ve seen consistent denial and duck‑shoving and hiding of the Board from these issues. And I don’t think they can hide much longer, given what’s occurred in the Supreme Court of Queensland.

AUSTIN: So what should the Board of BHP do?

SWAN: Well I think we should get an emphatic statement that they’re profoundly sorry for what they’ve done and that they will not be going down this road in the future.

AUSTIN: I checked their corporate website this afternoon and there was no statement on there yet—

SWAN: No, and given their corporate website and the way in which they seek to explain their tax arrangements, it is profoundly misleading. If you read the sort of numbers that run through their reports, they exaggerate the amount of tax they pay.

They fiddle the figures all the way through, to exaggerate the economic contribution to the country. I think they do make a big economic contribution to the country, but it is such a shame that our largest companies should be engaging in this sort of behaviour. Because when they engage in this behaviour, it affects all of us. It sends a message to people that tax evasion is a legitimate thing to do.

AUSTIN: And you think BHP owes money to other states as well, like Western Australia – why?

SWAN: Oh I certainly do. I think the money that they will owe to Western Australia will be significantly greater, significantly greater than the money that is owed to Queensland.

AUSTIN: On the basis of this confidential settlement they reached with the Queensland in the Supreme Court last week?

SWAN: Well no, not on the basis of that settlement. But I’m told that these issues are quite significant in Western Australia as well.


SWAN: But they’re even more significant in the country. So if you go and read their economic contributions report, they exaggerate the amount of tax they pay, in terms of company tax. They throw in royalties, which are not a tax – royalties are the price they pay for using the raw material of our country. They are not a tax.

AUSTIN: And as a result of this, you think it’s quite clear now that in their dispute over taxation with the Australian Taxation Office, as far as you’re concerned, BHP owes the people of Australia $1.8 billion in unpaid taxation.

SWAN: Roughly, roughly. I mean I can’t be assured of the last ten million, Steve, but a significant amount of money.

AUSTIN: Alright, appreciate you coming on this afternoon. Wayne Swan, thank you very much.

SWAN: Good to talk to you.

AUSTIN: Wayne Swan is the former Federal Treasurer of Australia. He’s the Labor Member for Lilley here in Brisbane. I did contact BHP’s Head Office in Melbourne. I contacted BHP’s Media Corporate Office here, for the east coast, as it’s known. We’ve been making attempts to contact BHP, but at this stage, we’ve not heard back from them.



Authorised by Noah Carroll ALP Canberra